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Web.com Reports Second Quarter 2007 Results

August 7, 2007 Web.com Reports Second Quarter 2007 Results ATLANTA, Aug 7, 2007 (PrimeNewswire via COMTEX News Network) -- Web.com, Inc. (Nasdaq:WWWW), a leading destination for websites and web services, today reported results for its second quarter ended June 30, 2007.

Summary of Second Quarter 2007 Results:


  • Total revenues for the quarter were $13.3 million, up from $12.1 million in the year-ago quarter.
  • Net income (loss) for the quarter was negative $(2.9) million, including $2.1 million in merger-related costs and $800,000 in stock-based compensation, or $(0.17) per share, versus a loss of $(5.7) million, or $(0.35) per share, in the year-ago quarter.
  • Adjusted net income (loss) from continuing operations(a) was $(1.7) million for the quarter, which includes approximately $2.1 million of merger-related costs, versus a loss of $(3.6) million in the year-ago quarter. Excluding the merger-related costs, adjusted net income from continuing operations for the quarter was positive $0.4 million.
  • Net subscribers totaled approximately 166,000 at June 30, 2007. Gross organic subscribers totaled approximately 20,000, up approximately 7,000 gross subscribers, or 53%, from June 30, 2006.

"Web.com had another solid quarter of subscriber growth," stated Jeff Stibel, President and CEO, Web.com. "Our marketing and partner strategy enabled us to deliver these results while reducing our subscriber acquisition cost (SAC) by 14% sequentially which led to improved adjusted net income from continuing operations. Clearly the biggest opportunity for the company in the coming months is the proposed merger with Website Pros. We continue to view this opportunity very positively for our customers, partners, employees and shareholders and are eager to close the transaction and begin to execute as a combined company."

"During the second quarter, in addition to growing the business, we continued to focus on streamlining operations and consolidating to our unified platform to realize approximately $5.0 million in savings," stated Gonzalo Troncoso, Executive Vice President and Chief Financial Officer. "Our path to profitability is simple -- increase sales and decrease costs."

On June 26, 2007, Web.com announced that it had signed a definitive merger agreement with Website Pros, Inc. (Nasdaq:WSPI) creating a market leader in the small and medium-sized business (SMB) web services industry with annualized revenue of over $122 million and over 246,000 paid subscribers based on second quarter numbers. In addition, the proposed merger enables the new company to offer a full suite of comprehensive Do-It-For-Me (DIFM) and Do-It-Yourself (DIY) web services for small and medium-sized businesses, adds significant cross-selling opportunities and highly complementary sales channels. Based on the closing price of Website Pros' stock on June 26, 2007, the transaction is valued at an aggregate price of approximately $129 million. The merger, which is subject to regulatory reviews and approvals, approval by the shareholders of both companies and certain other customary conditions, is expected to close during the second half of 2007.

About Web.com

Web.com, Inc. (Nasdaq:WWWW) is a leading destination for the simplest, yet most powerful solutions for websites and web services. Web.com offers do-it-yourself and professional website building, website hosting, ecommerce, web marketing, professional website design and e-mail. Since 1995, Web.com has been helping individuals and small businesses leverage the power of the Internet to build a web presence. More than 4 million websites have been built using Web.com's proprietary tools, services and patented technology. The company's web hosting and website building services can also be found under the Interland (www.interland.com) and Trellix (www.trellix.com) brands. For more information on the company, please visit www.web.com or call at 1-800-WEB-HOST.

Web.com will host a conference call today to discuss its quarterly results at 9:30 a.m. ET (6:30 a.m. PT). A live webcast of the call can be accessed on the investors section of the company's website at www.web.com/ir. A replay of the call will be available on the site for seven days.

(a) Adjusted net income (loss) from continuing operations is a non-GAAP financial measure and is defined as net income (loss) from continuing operations excluding interest income or expense, provision for income taxes, depreciation, amortization of intangibles, and stock-based compensation.

Note Regarding Use of Non-GAAP Financial Measures

This earnings release contains non-GAAP financial measures. A non-GAAP financial measure is a numerical measure of a company's historical or future financial performance, financial position or cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of income, balance sheet or statement of cash flows (or equivalent statements) of the issuer; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented. In this regard, GAAP refers to generally accepted accounting principles in the United States. Attached to this earnings release is a reconciliation of the non-GAAP financial measure to the most directly comparable GAAP financial measures.

Web.com, Inc. uses the non-GAAP measure adjusted net income (loss) from continuing operations to supplement the Consolidated Financial Statements presented in accordance with GAAP. This non-GAAP financial measure is used in addition to and in conjunction with the financial results presented in accordance with GAAP, and the presentation of this non-GAAP financial information should not be considered in isolation, or as a substitute for the GAAP conforming measures.

Management uses adjusted net income (loss) from continuing operations for financial and operational decision making, to evaluate management performance for compensation purposes, and as a means to provide comparable period-to-period operating results. This information is generally requested by investors and analysts. Web.com, Inc. believes that providing this non-GAAP measure provides greater transparency to investors to view the business through the eyes of management. We define adjusted net income (loss) from continuing operations as net income (loss) from continuing operations excluding (i) provision for income taxes, (ii) interest income or expense, (iii) depreciation, (iv) amortization of intangibles, and (v) stock-based compensation. Management uses this non-GAAP financial measure as a primary measure in monitoring and evaluating the Company's ongoing operating results and trends in its operations. The Company believes that excluding income (loss) from discontinued operations provides a more relevant measure of the Company's present web services business. The Company's income (loss) from discontinued operations relates to the Company's prior business of manufacturing personal computers, which the Company sold in fiscal 2001, and is wholly unrelated to the Company's present web services business. By excluding these discontinued operations, the Company believes management and investors are better able to compare operating results of the Company's existing business over multiple periods. Management believes the exclusion of stock-based compensation provides a more consistent comparison against prior year periods, since stock-based compensation was not included in net income (loss) for prior fiscal years. Management believes that measuring the performance of the business without regard to discontinued operations and interest, taxes and depreciation and amortization can make trends in operating results more readily apparent, and when considered with other information, assist management and investors in evaluating the Company's ability to generate future earnings. A substantial portion of the Company's non-cash charges relate to historical transactions and capital expenditures that the current management may or may not have influenced. When considered with other performance metrics that alternatively include or exclude these charges, the Company believes the investor, like management, has a measure that provides both individual and collective management effectiveness. The Company believes that this non-GAAP measure is beneficial to management and investors for planning, budgeting and financial modeling purposes, as well as for comparison to its historical performance from period to period and to competitors' operating results. We believe both short and long term performance is transparent by providing GAAP and non-GAAP basis measurements to investors and analysts.

The limitations of use of the non-GAAP measure of adjusted net income (loss) from continuing operations as compared to net income (loss) in accordance with GAAP include the fact that the measure excludes some recurring costs such as depreciation and amortization and stock-based compensation, which are expected to continue as a significant recurring expense in the Company's business. Adjusted net income (loss) from continuing operations also does not take into account costs of doing business that can be substantial, such as income taxes and interest expense. Further, adjusted net income (loss) from continuing operations may not be comparable to similarly captioned information reported by other companies. The Company compensates for these limitations by providing specific information regarding the GAAP amounts excluded from this non-GAAP measure, by providing reconciliation to the most directly comparable GAAP financial measure and by evaluating adjusted net income (loss) from continuing operations together with net income (loss) and other financial measures calculated in accordance with GAAP.

The Company also has presented adjusted net income (loss) from continuing operations, excluding merger related costs to provide a more relevant comparison of this non-GAAP financial measure. During the 2007 second quarter, the Company incurred significant costs in connection with its pending merger with Website Pros, which costs did not exist in the 2006 period. By excluding these costs from adjusted net income (loss) from continuing operations in the 2007 period, the Company is able to show what this non-GAAP financial measure would have been had it not engaged in the extraordinary transaction with Website Pros, which the Company believes provides a more meaningful comparison of its operations between the 2007 and 2006 periods presented.

Forward-Looking Statements

This press release includes forward-looking statements, including those regarding the proposed merger of Website Pros and Web.com and the anticipated reach, capabilities and opportunities for the combined company, future products and services, expected benefits to merchants and other customers, market opportunities, expected customer base, and the anticipated closing of the transaction. These statements are based on certain assumptions and reflect our current expectations. Statements including words such as "anticipate," "propose," "estimate," "believe" or "expect" and statements in the future tense are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements to differ materially from any future results, performance, or achievements discussed or implied by such forward-looking statements. Some of the factors that could cause results to differ materially from the expectations expressed in these forward-looking statements include the following: the risk that the proposed merger transaction may not be completed in a timely manner, if at all; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; risks related to the successful offering of the combined company's products and services; the risk that the anticipated benefits of the merger may not be realized; and other risks that may impact Website Pros' and Web.com's businesses, some of which are discussed in the companies' reports filed with the Securities and Exchange Commission (the "SEC") under the caption "Risks That Could Affect Future Results" or "Risk Factors" and elsewhere, including, without limitation, each of Website Pros' and Web.com's 10-Ks for the year ended December 31, 2006 and 10-Q's for the quarter ended March 31, 2007. Copies of Website Pros' and Web.com's filings with the SEC can be obtained on their websites, or at the SEC's website at www.sec.gov. You can also obtain Website Pros' report through its Web site at http://www.websitepros.com and Web.com's reports through its Web site at http://www.web.com . Any forward-looking statement is qualified by reference to these risks, uncertainties and factors. If any of these risks or uncertainties materializes, the merger may not be consummated, the potential benefits of the merger may not be realized, the operating results of Website Pros and Web.com could suffer, and actual results could differ materially from the expectations described in these forward-looking statements. Forward-looking statements speak only as of the date of the document in which they are made. These risks, uncertainties and factors are not exclusive, and Website Pros and Web.com undertake no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this release.

Additional Information about the Proposed Transaction

In connection with the proposed transaction, Website Pros and Web.com filed a joint proxy statement and other relevant materials with the Securities and Exchange Commission ("SEC"). BEFORE MAKING ANY VOTING DECISION WITH RESPECT TO THE PROPOSED TRANSACTION, STOCKHOLDERS OF WEB.COM AND WEBSITE PROS ARE URGED TO READ THE PROXY STATEMENT, WHEN IT BECOMES AVAILABLE, AND THE OTHER RELEVANT MATERIALS FILED BY THE COMPANIES WITH THE SEC BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The proxy statement and other relevant materials, when available, and any other documents filed by Website Pros and Web.com with the SEC, may be obtained free of charge at the SEC's website at www.sec.gov. In addition, stockholders of Web.com may obtain free copies of the documents filed with the SEC by contacting Investor Relations at 303 Peachtree Center Ave, 5th Floor, Atlanta, GA 30303 or e-mailing investor@corp.web.com, and stockholders of Website Pros may obtain free copies of the documents filed with the SEC by contacting Investor Relations at 12735 Gran Bay Parkway West, Jacksonville, Florida 32258 or e-mailing kori.doherty@icrinc.com. You may also read and copy any reports, statements and other information filed by the companies with the SEC at the SEC public reference room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 or visit the SEC's website for further information on its public reference room.

Web.com, Website Pros and their executive officers and directors may be deemed to be participants in the solicitation of proxies from their stockholders in favor of the proposed transaction. Certain executive officers and directors of each company have interests in the transition that may differ from the interests of stockholders generally. Additional information regarding the interests of such potential participants will be included in the proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

 WEB.COM, INC.
   CONSOLIDATED STATEMENT OF OPERATIONS
   (In thousands, except per share amounts)
   (Unaudited)
  
                                    For the three        For the six
                                     months ended        months ended
                                       June 30,            June 30,
                                    2007      2006      2007      2006
                                    ----      ----      ----      ----
  
   Revenues                      $ 13,268  $ 12,053  $ 26,300  $ 24,315
  
   Operating costs and expenses:
    Network operating costs,
     exclusive of depreciation
     and amortization (1)           2,072     2,269     4,226     4,653
    Sales and marketing             4,148     3,335     8,847     6,485
    Technical support               1,259     1,761     2,548     3,483
    General and administrative      5,730     4,694    10,808    14,605
    Bad debt expense                  439       242     1,001       519
    Depreciation and amortization   1,088     2,225     2,160     3,359
    Restructuring costs                --        23        --        66
    Impairment of investment in
     and advances to WebSource
     Media                             --     3,488        --     3,488
    Merger costs                    2,079        --     2,079        --
                                 --------  --------  --------  --------
   Total operating costs and
    expenses                       16,815    18,037    31,669    36,658
                                 --------  --------  --------  --------
   Operating loss                  (3,547)   (5,984)   (5,369)  (12,343)
   Interest income (expense), net     381       248       636       509
                                 --------  --------  --------  --------
   Loss from continuing
    operations before income
    taxes                          (3,166)   (5,736)   (4,733)  (11,834)
   Income tax benefit                 275         9     1,190       863
                                 --------  --------  --------  --------
   Loss from continuing
    operations                     (2,891)   (5,727)   (3,543)  (10,971)
   (Loss) income from
    discontinued operations, net
    of tax of $0, $0, $1,201
    and $0                             (4)       14     2,207      (245)
                                 --------  --------  --------  --------
   Net loss                      $ (2,895) $ (5,713) $ (1,336) $(11,216)
                                 ========  ========  ========  ========
   Net loss per share, basic and
    diluted:
     Continuing operations       $  (0.17) $  (0.35) $  (0.21) $  (0.67)
     Discontinued operations           --        --      0.13     (0.01)
                                 --------  --------  --------  --------
                                 $  (0.17) $  (0.35) $  (0.08) $  (0.68)
  
   Number of shares used in per
    share calculation:
     Basic and diluted             16,775    16,511    16,741    16,453
  
   (1) Excludes depreciation and
       amortization as follows:
       Network operating costs        766     1,969     1,518     2,782
  
   WEB.COM, INC.
   Adjusted Net Income (Loss) From Continuing Operations
   (In thousands)
   (Unaudited)
  
                                   For the three        For the six
                                    months ended        months ended
                                      June 30,            June 30,
                                   2007      2006      2007      2006
                                   ----      ----      ----      ----
  
  
   Net loss                     $ (2,895) $ (5,713) $ (1,336) $(11,216)
  
    Depreciation and
     amortization                  1,088     2,225     2,160     3,359
    Amortization of stock-
     based compensation              765       159     1,307     5,496
    Interest expense (income)       (381)     (248)     (636)     (509)
    Income tax benefit              (275)       (9)   (1,190)     (863)
    Discontinued operations            4       (14)   (2,207)      245
                                --------  --------  --------  --------
   Adjusted net loss from
    continuing operations       $ (1,694) $ (3,600) $ (1,902) $ (3,488)
                                --------  --------  --------  --------
   Merger-related costs            2,079        --     2,079        --
                                --------  --------  --------  --------
   Adjusted net income (loss)
    excluding merger-related
    costs                       $    385  $ (3,600) $    177  $ (3,488)
                                --------  --------  --------  --------
  
   WEB.COM, INC.
   CONSOLIDATED BALANCE SHEETS
   (In thousands)
   (Unaudited)
                                                         As of
                                                  --------------------
                                                   June 30, December 31,
                                                     2007      2006
                                                  ---------  ---------
   Assets
    Current assets
     Cash and cash equivalents                    $  14,850  $  13,288
     Trade receivables, net of allowance for
      doubtful accounts                               2,532      2,074
     Other receivables                                1,317        525
     Other current assets                             1,596      1,154
     Restricted investments                             167        162
                                                  ---------  ---------
    Total current assets                             20,462     17,203
  
     Restricted investments                           7,141      7,666
     Property, plant and equipment, net               3,455      4,128
     Goodwill                                         1,003      1,003
     Intangibles, net                                 4,567      5,233
     Other assets                                     3,252      3,195
                                                  ---------  ---------
   Total assets                                   $  39,880  $  38,428
                                                  =========  =========
   Liabilities and shareholders' equity
    Current liabilities
     Accounts payable                             $   1,835  $   1,623
     Accrued expenses                                 6,770      4,709
     Accrued restructuring charges                    1,812      2,345
     Current portion of long-term debt and capital
      lease obligations                               1,747      1,703
     Accrued FTC settlement                             929         --
     Deferred revenue                                 4,438      4,687
                                                  ---------  ---------
    Total current liabilities                        17,531     15,067
  
     Long-term debt and capital lease obligations     1,044      1,971
     Deferred revenue, long-term                        229        314
     Other liabilities                                   64        120
                                                  ---------  ---------
   Total liabilities                                 18,868     17,472
                                                  ---------  ---------
   Shareholders' equity
    Common stock, $.01 par value, authorized 26
     and 26 million shares, issued and outstanding
     17.0 and 16.8 million shares, respectively         169        168
    Additional capital                              333,340    331,949
    Warrants                                          2,128      2,128
    Note receivable from shareholder                   (735)      (735)
    Accumulated deficit                            (313,890)  (312,554)
                                                  ---------  ---------
   Total shareholders' equity                        21,012     20,596
                                                  ---------  ---------
   Total liabilities and shareholders' equity     $  39,880  $  38,428
                                                  =========  =========
   WEB.COM, INC.
   CONSOLIDATED BALANCE SHEETS
   (In thousands)
   (Unaudited)
                                                      As of June 30,
                                                   --------------------
                                                      2007       2006
                                                   ---------  ---------
  
   Assets
    Current assets
     Cash and cash equivalents                     $  14,850  $  13,163
     Trade receivables, net of allowance for
      doubtful accounts                                2,532      1,739
     Other receivables                                 1,317      1,139
     Other current assets                              1,596      1,698
     Restricted investments                              167        279
                                                   ---------  ---------
    Total current assets                              20,462     18,018
  
     Restricted investments                            7,141      8,322
     Property, plant and equipment, net                3,455      4,757
     Goodwill                                          1,003        921
     Intangibles, net                                  4,567      5,900
     Other assets                                      3,252      5,600
                                                   ---------  ---------
   Total assets                                    $  39,880  $  43,518
                                                   =========  =========
  
   Liabilities and shareholders' equity
    Current liabilities
  
     Accounts payable                              $   1,835  $   1,893
     Accrued expenses                                  6,770      6,637
     Accrued restructuring charges                     1,812      2,838
     Current portion of long-term debt and
      capital lease obligations                        1,747      1,716
     Other current liabilities                           929         --
     Deferred revenue                                  4,438      4,517
                                                   ---------  ---------
    Total current liabilities                         17,531     17,601
  
     Long-term debt and capital lease obligations      1,044      2,906
     Deferred revenue, long-term                         229        239
     Other liabilities                                    64        155
                                                   ---------  ---------
   Total liabilities                                  18,868     20,901
                                                   ---------  ---------
   Shareholders' equity
     Common stock, $.01 par value, authorized 26
      and 26 million shares, issued and
      outstanding 17.0 and 16.6 million shares,
      respectively                                       169        166
     Additional capital                              333,340    331,104
     Warrants                                          2,128      2,128
     Note receivable from shareholder                   (735)      (735)
     Accumulated deficit                            (313,890)  (310,046)
                                                   ---------  ---------
   Total shareholders' equity                         21,012     22,617
                                                   ---------  ---------
   Total liabilities and shareholders' equity      $  39,880  $  43,518
                                                   =========  =========
  
   WEB.COM, INC.
   CONSOLIDATED STATEMENTS OF CASH FLOWS
   (In thousands)
   (Unaudited)
                                                    For the six months
                                                       ended June 30,
                                                      2007       2006
                                                      ----       ----
  
   CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                        $ (1,336)   $(11,216)
   Adjustments to reconcile net loss to net cash
    used in operating activities from continuing
    operations:
    (Gain) loss from discontinued operations         (3,408)        245
    Depreciation and amortization                     2,160       3,359
    Bad debt expense                                  1,001         519
    Impairment of investment in and advances to
     WebSource Media                                     --       3,488
    Stock-based compensation                          1,307       5,496
    Restructuring costs                                  --          66
    Changes in operating assets and liabilities
     net of effect of acquisition:
     Receivables                                     (2,250)       (405)
     Other current and long term assets                (492)        325
     Accounts payable, accrued expenses and
      deferred revenue                                1,350      (1,339)
     Other current liabilities                          929          --
                                                   --------    --------
   Cash (used in) provided by operating activities
    of continuing operations                           (739)        538
                                                   --------    --------
  
   CASH FLOWS FROM INVESTING ACTIVITIES
    Expenditures for property, plant, and
     equipment                                         (828)     (1,141)
    Payment for purchase of WebSource Media              --      (3,261)
    Proceeds from sale of held-to-maturity
     investment securities                               --          53
    Net change in restricted investments                520         690
                                                   --------    --------
   Cash used in investing activities of continuing
    operations                                         (308)     (3,659)
                                                   --------    --------
  
   CASH FLOWS FROM FINANCING ACTIVITIES
    Repayments of debt and capital lease
     obligations                                       (884)       (921)
    Proceeds from exercises of stock options             85         115
                                                   --------    --------
   Cash used in financing activities of continuing
    operations                                         (799)       (806)
                                                   --------    --------
  
   Net cash used in continuing operations            (1,846)     (3,927)
                                                   --------    --------
   Net cash provided by (used in) discontinued
    operations:
    Operating cash flows                              3,408        (280)
    Investing cash flows                                 --          --
    Financing cash flows                                 --          --
                                                   --------    --------
   Total cash provided by (used in) discontinued
    operations                                        3,408        (280)
                                                   --------    --------
   Net increase (decrease) in cash and cash
    equivalents                                       1,562      (4,207)
   Cash and cash equivalents at beginning of
    period                                           13,288      17,370
                                                   --------    --------
   Cash and cash equivalents at end of period      $ 14,850    $ 13,163
                                                   ========    ========
  
  

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SOURCE: Web.com, Inc.
Web.com
Peter Delgrosso
404-260-2500
investor@corp.web.com